Save Article

Divergence Between Fed-Funds Rate
And Libor May Pose Problems

By

Michael Connolly

Updated Sept. 5, 2007 12:01 a.m. ET

More than two weeks after central banks in the U.S., Europe and Asia sought to settle short-term lending by injecting massive amounts of cash into the global financial system, the disjointed movement in the London interbank offered rate, or Libor, and other short-term interest rates underscores the turmoil that persists in money markets.

As Ian McDonald and Alistair MacDonald report, though the U.S. Federal Reserve could cut short-term interest rates in the weeks ahead, Libor currently is going in exactly the opposite...